General

This week a “Republican wave” swept the country and propelled many fiscally conservative governors to reelection. And in Pennsylvania, candidates that ran on pension reform, liquor privatization, choice in education, and paycheck protection were elected—expanding Republican control of the state Legislature.

So, why did the same voters hand the keys to the governor’s mansion over to a candidate promising higher taxes and more spending?

Matt Brouillette, discussing the election results on WSBA’s The Gary Sutton Show on Wednesday, offers an explanation:

Ultimately it was [public sector union leaders] using tax payer collected union money that framed that narrative of billion dollar cut in education, a lack of a severance tax—these were the things that unfortunately Tom Corbett was not able to counter, nor did he confront it head on.

Matt says governors in other swing states took a more direct approach to combating government union leaders’ undue influence and were rewarded by voters:

This biggest takeaway I think, and we certainly see this in the context of nationally, where you saw Republican governors in blue states—such as Scott Walker in Wisconsin, Rick Snyder in Michigan, as well as Bruce Rauner who is the governor elect in Illinois—these folks took head on the opponents of the taxpayers and that was the public employee unions. When you have bold leadership and you fight those battles that are absolutely necessary, you will win!

What do teacher union CEO's have to say about this ruling? They ignore the issue, and instead point to the usual bogeymen with name calling. Here's NEA president Dennis Van Roekel:

This lawsuit was never about helping students, but is yet another attempt by millionaires and corporate special interests to undermine the teaching profession and push their own ideological agenda on public schools and students while working to privatize public education.

Federal charges of racketeering and arson against several Philadelphia union members, who called themselves The Helpful Union Guys (or T.H.U.G.s) has renewed interest in closing a loophole in state law, exempting parties in a labor dispute from prosecution.

HB 1154 would remove these exemptions. Shockingly, union leaders defend the exemptions. They argue that stalking, harassment, and threatening to use WMDs are somehow vital to free speech. They also offer the defense "hey businesses do it too."

Frank Snyder, secretary-treasurer of the Pennsylvania AFL-CIO, tells the Lehigh Valley Morning Call the exemptions protect free speech and claims National Labor Relations Board figures "show employers routinely, and with total disregard for the law, intimidate, harass, stalk and even fire people who try to form unions."

There's a huge flaw in Mr. Snyder's logic. HB 1154 would remove the exemption for all parties in a labor dispute, both unions and employers. If he truly believes that business owners are getting away with harassment, he should supportremoving that loophole from the law to crack down on abuses.

In a scathing investigative report, Chris Papst at CBS 21 revealed a widespread culture in Pennsylvania's Department of Public Welfare (DPW)—and orders from supervisors—to look past fraudulent claims to enroll more people in welfare program.

DPW accounts for 40 percent of the state's budget and makes an estimated 15 percent of all Medicaid payments in error, according to a report by the Auditor General, wasting an incredible $1 billion annually.

This morning, CF President & CEO Matthew Brouillette appeared on FOX Business's Varney & Co. to highlight the public pension crisis facing Pennsylvania and cities and states across the nation.

Matt's appearance follows his recent op-ed in Investor’s Business Daily which draws lessons from Detroit’s economic decline and bankruptcy. He warns that state and city public pension and health care costs together equal $60,000 per family of four.

The next hours and days could dramatically shape Pennsylvania's future, but will it be for the better? As time winds down before the final budget passes, several critical issues hang in the balance. Here's where you can help:

The Senate is working out their liquor privatization plan today. Pennsylvania consumers and taxpayers deserve and demand real privatization, not half measures. Click here to write your Senator.

A critical first step to address the state’s $47 billion pension hole passed committees in both the House and Senate, but government unions are fighting this much-needed reform. Moving new state employees to 401(k)-type plans would make retirements affordable, predictable, and current for taxpayers and employees. Click here to write lawmakers.

Legislation that unfairly targets cyber schools continues to linger in the legislature. Click here to tell lawmakers to protect these schools of choice for more than 30,000 Pennsylvania kids.

To be clear, there is no loophole and it isn't specifically related to Delaware.

What those who use the term really mean is they want to shift to using Mandatory Unified Combined Reporting(MUCR) on corporate tax returns, rather than the current system of Single Filing. This means a multi-state company would have to submit returns from all their national and international operations and subsidiaries to the state Department of Revenue, rather than simply the Pennsylvania company.

That sounds boring and complicated. For those who read through that last paragraph, pat yourselves on the back.

Those pushing this agenda have masterfully crafted a talking point saying "Close the Delaware Loophole!" This term misleads people. Some think that if a company has a headquarters in Delaware or another state, they don’t pay corporate taxes.

False: Corporations, regardless of where their headquarters are, still have to pay our rate of 9.99% on their Pennsylvania profits. Changing the method of tax reporting doesn’t mean the state will get more revenue. There is little difference in revenue between states with MURC and states with Single Filing.

Moreover, the talking point that 70 percent of corporations don’t have any Corporate Net Income Tax liability is true. But it is because most corporations don’t earn profits (either because they are losing money, or because they are legal corporations without any actually operations). It has nothing to do with our Single Filing method of tax reporting. In fact, some states that use Mandatory Unified Combined Reporting also have 70 percent of corporations filing tax returns with zero tax liability.

All the move from Single Filing to Mandatory Unified Combined Reporting does is to give the Department of Revenue more power and make filing tax returns more complex.

So how do "Delaware Loophole" proponents think Pennsylvania will collect additional revenue under MUCR? It relates to corporations when they pay an affiliated company (or a holding company) for the rights to a logo, license fees, royalties, etc. These are business expenses, and are thus would take away from a company's profits. The allegation—though without much evidence—is that companies are transferring profits out of state without having a legitimate business expense. If the state shifted to Mandatory Unified Combined Reporting, it would allow the Department of Revenue to review all of a company's records.

However, another proposal put forth (currently part of HB 440) would require companies to report these sorts of transactions to affiliated companies, and would prohibit certain payments for "intangible assets." This is termed an "add-back provision."

This morning, Pennsylvania lost its oldest living governor: George M. Leader, a York County Democrat who served from 1955 to 1959. My colleagues and I had the great pleasure of working arm in arm with Governor Leader, his family, and a broad coalition that transcended partisan boundaries to help bring substantive corrections reform to Pennsylvania in 2012. We were further honored when his daughter, Jane Leader Janeczek, agreed to join our Board of Directors in order to continue fighting for the policy changes our commonwealth so desperately needs.

Governor Leader’s passion for serving the underserved, from his elder care business to his philanthropic work to better the lives of the poor, the imprisoned and their families, is an inspiration to us all at the Commonwealth Foundation. So is the way he lived his life: Just as the Founders intended, he served in elected office and then, after a time, went back to live and work under the laws he helped enact—serving the public in a different way, as a successful entrepreneur. He believed deeply that finding effective and efficient ways of solving our public problems is not a partisan issue, and I’m so pleased that we were able to work with him to help realize some of his wishes last year.

May God grant the Leader family peace and joy as they celebrate a life that was unquestionably well lived.

A leader in delivering compassionate elderly care and longtime Pennsylvania community advocate has been elected to the Commonwealth Foundation Board of Directors, CF announced today.

Jane Leader Janeczek, owner and board director of the George M. Leader Family Corp. and Providence Place Retirement Communities joins six additional directors of the Harrisburg-based think tank that crafts free-market policies, convinces Pennsylvanians of their benefits and counters attacks on liberty.

"We could not be more honored and fortunate than to have Jane Janeczek on our team," said Matthew J. Brouillette, CF president and CEO. "Jane brings a lifetime of passion, persistence and proficiency to Pennsylvania's freedom movement and we are excited to have her join CF in helping Pennsylvanians enjoy an abundance of opportunities to provide for themselves, their families and their neighbors."

Janeczek, daughter of former Pennsylvania Gov. George M. Leader, spent 10 years as a member of Country Meadows' Design Group, and chaired a variety of committees including Advertising and Corporate Contributions. Previous to that, Jane was a marketing manager for Xerox, serving two national accounts; Allied Chemical and Warner Lambert.

"Commonwealth Foundation shares my impatience with the bureaucracy and inertia that hold back real reform to protect and improve Pennsylvania's future," said Janeczek, who with her father spearheaded formation of a transpartisan coalition leading to unanimous passage of two major pieces of criminal justice reform legislation that will make Pennsylvania's communities safer and save taxpayers millions of dollars. "CF's efforts on corrections reform were a primary reason that meaningful legislation was passed so quickly, and I look forward to helping duplicate that success in many other policy areas."

Janeczek is a 1975 cum laude graduate of Lafayette College with a B.A. in Psychology.

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For more information, please contact Jay Ostrich, director of public affairs at jay@cfpolicy.com.